Exam 6: Accounting for Long-Term Operational Assets

Jing Company was started on January 1, Year 1 when it issued common stock for $50,000 cash. Also, on January 1, Year 1 the company purchased office equipment that cost $34,000 cash. The equipment was delivered under terms FOB shipping point, and transportation cost was $2,000. The equipment had a five-year useful life and a $12,000 expected salvage value.Assume that Jing Company earned $30,000 cash revenue and incurred $19,000 in cash expenses in Year 3. Using straight-line depreciation and assuming that the office equipment was sold on December 31, Year 3 for $16,000, the amount of net income or (loss) appearing on the December 31, Year 3 income statement would be:

Chico Company paid $510,000 for a basket purchase that included office furniture, a building and land. An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Office furniture $115,000; Building $410,000, Land $85,000. Based on this information, the amount of cost that would be allocated to the office furniture is closest to:

Mays Corporation purchased a new truck on January 1, Year 1 for $65,000 cash. Mays estimated salvage value of $10,000 at the end of the useful life of 5 years. On January 1, Year 3, Mays had to replace the engine of the truck paying $4,000 cash. Due to the replaced engine, Mays estimates that the truck will continue a productive life for another four years. Required: Assuming straight-line depreciation is used, calculate the depreciation expense for Year 3.

Explain how a choice of depreciation methods will have an impact on financial performance measures such as expense, net income and total assets. Give one example.

The use of estimates and revision of estimates are uncommon in financial reporting.

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,995,000. Harding paid $560,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $592,000; Building, $1,760,000 and Equipment, $1,168,000.Assume that Harding uses the units-of-production method when depreciating its equipment. Harding estimates that the purchased equipment will produce 1,110,000 units over its 5-year useful life and has salvage value of $18,000. Harding produced 276,000 units with the equipment by the end of the first year of purchase.Which amount below is closest to the amount Harding will record for depreciation expense for the equipment in the first year? (Round your intermediate percentages to the nearest whole number: i.e 0.054231 = 5%. Do not round any other intermediate calculations.)

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,900,000. Harding paid $350,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $374,000; Building, $1,100,000 and Equipment, $726,000. Assume that Harding uses the units-of-production method when depreciating its equipment. Harding estimates that the purchased equipment will produce 1,000,000 units over its 5-year useful life and has salvage value of $34,000. Harding produced 265,000 units with the equipment by the end of the first year of purchase. Which amount below is closest to the amount Harding will record for depreciation expense for the equipment in the first year? (Do not round your intermediate calculations.)

Recognizing depreciation expense on equipment or a building is an asset use transaction.

The cost of natural resources includes the purchase price, as well as exploration costs and surveys.

Anton Company paid cash to prolong the life of one of its assets. Which of the following choices accurately reflects how this event would affect Anton's financial statements?

Which of the following intangible assets is the value attributable to favorable factors such as reputation, location, and superior products?

On March 1, Bartholomew Company purchased a new stamping machine with a list price of $34,000. The company paid cash for the machine; therefore, it was allowed a 5% discount. Other costs associated with the machine were: transportation costs, $550; sales tax paid, $1,360; installation costs, $450; routine maintenance during the first month of operation, $500. The cost recorded for the machine was:

Land differs from other property because it is not subject to depreciation.

On January 1, Year 2, Ballard Company spent $22,000 on an asset to improve its quality. The asset had been purchased on January 1, Year 1, for $58,000. The asset had a $14,800 salvage value and a 6-year life. Ballard uses straight-line depreciation. What would be the book value of the asset on January 1, Year 5?

On January 1, Year 1, Phillips Company made a basket purchase including land, a building and equipment for $850,000. The appraised values of the assets are $58,000 for the land, $860,000 for the building and $152,000 for equipment. Phillips uses the double-declining-balance method of depreciation for the equipment which is estimated to have a useful life of four years and a salvage value of $10,000. The depreciation expense for Year 1 for the equipment is: (Round your intermediate percentages to 2 decimal places: ie .054231 = 5.42%.)

On January 1, Year 1, Mike Moving Company paid $27,000 to purchase a truck. Mike planned to drive the truck for 50,000 miles then sell it. The truck was expected to have a $3,000 salvage value. The truck was actually driven 15,000 miles during Year 1, 10,000 miles during Year 2, 5,000 miles during Year 3, and 20,000 miles during Year 4. If Mike uses the units of production method, which of the following shows how the adjustment to recognize depreciation expense at the end of Year 3 will affect the company's financial statements?

Jing Company was started on January 1, Year 1 when it issued common stock for $39,000 cash. Also, on January 1, Year 1 the company purchased office equipment that cost $16,300 cash. The equipment was delivered under terms FOB shipping point, and transportation cost was $2,400. The equipment had a five-year useful life and a $6,100 expected salvage value.Assume that Jing Company earned $26,200 cash revenue and incurred $16,500 in cash expenses in Year 3. Using straight-line depreciation and assuming that the office equipment was sold on December 31, Year 3 for $10,000, the amount of net income or (loss) appearing on the December 31, Year 3 income statement would be:

Monroe Minerals Company purchased a copper mine for $120,000,000. The mine was expected to produce 50,000 tons of copper over its useful life. During Year 1, the company extracted 6,000 tons of copper. The copper was sold for $4,500 per ton. Assume that the company incurred $8,040,000 in operating expenses during Year 1. Based on this information, how much net income would Monroe report in Year 1?

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $2,375,000. Harding paid $700,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $778,920; Building, $2,161,080 and Equipment, $786,000.What value will be recorded for the building?

Kasper Industries purchased a machine for $16,900 cash. The machine had a ten-year useful life and a $5,900 expected salvage value. Required: Compute the depreciation expense using straight-line method for each of the ten years.